Bay Area Ideas has downgraded Applied Materials (NASDAQ:AMAT) to Hold amid concerns about declining free cash flow and significant China exposure despite strong AI-driven prospects. Similarly, Kennedy Njagi has moved Credo Technology (NASDAQ:CRDO) from Strong Buy to Hold, noting that recent price appreciation has captured much of the company’s near-term upside.
Meanwhile, analysts have found value opportunities in Accenture (NYSE:ACN) and Colgate-Palmolive (NYSE:CL), both receiving upgrades to Buy ratings as their valuations have dropped to attractive levels despite solid fundamentals and growth prospects.
Upgrades
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Accenture plc (NYSE:ACN): Upgrade to Buy by Uttam Dey. Despite recent market pessimism driving its valuation to decade lows, the analyst cites accelerating revenue growth, record-high free cash flow per share, and a significant undervaluation relative to the company’s fundamentals.
“Accenture should be reporting FY25 revenues of $69.4B next week, implying 6.9% y/y growth, accelerating from FY24’s revenue growth pace of ~1.2%. Its free cash of $10.2B is currently growing at 18% growth rates, with FCF margins accelerating to ~15% on a TTM basis… Despite all this performance, Accenture’s shares are trading at just ~17.2x FY26 EPS because markets are calling doom and gloom on Accenture’s new bookings growth due to the impact from its Federal services business.”
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Colgate-Palmolive Company (NYSE:CL): Upgrade to Buy by Florian Muller. The analyst highlights the company’s stable growth, resilient pricing power, and favorable entry point after the stock has fallen to targeted accumulation levels of $81-82.
“CL’s organic top-line growth remained at a steady 2%, driven by resilient pricing power and with volumes largely flat. That might be an overall sign of establishing a growth bottom after the previous few quarters’ declines. At the same time, the weak U.S. dollar helps to massively shrink FX headwinds, even enabling 1% reported growth. After all, 67% of CL’s revenues are non-U.S., rendering it a play on a continuously weak USD and limiting the effect of a weak U.S. economy.”
Downgrades
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Applied Materials, Inc. (NASDAQ:AMAT): Downgrade to Hold by Bay Area Ideas. The analyst points to soft Q4 guidance indicating year-over-year declines in revenue and EPS, coupled with declining free cash flow and significant China exposure as key concerns.
“While operating margin was a bit weak in their Applied Global Services segment, the company as a whole saw adjusted operating margin expand by 190 basis points to show improved overall efficiency… However, with CAPEX up 96.63% YoY to $584 million, FCF actually saw declines of 1.82% YoY to $2.050 billion. This has the potential to weigh on shareholder returns but do note that these investments may pay off down the road.”
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Credo Technology Group Holding Ltd (NASDAQ:CRDO): Downgrade to Hold by Kennedy Njagi. Despite impressive growth, including a 274% year-over-year revenue increase, the analyst believes much of the positive outlook is now priced into the stock following a 190% rally since initial coverage.
“Given the current price level, I believe the recent rally has priced in much of the near-term upside. And that’s why I am shifting my rating from a Strong Buy to a Hold rating. Make no mistake. I still strongly believe that CRDO is a great company with strong growth prospects in the future. I mean, the company is slowly and quietly becoming a key standard in AI interconnect. For the long term, it’s definitely a stock to have in my portfolio.”